This invention relates generally to systems and methods for performing credit transactions. Specifically, this invention relates to a method and system for providing purchasable value to a credit account holder, which value is in the form of a secondary account and credit instrument having a limited value and useful at a plurality of retail institutions or other locations where purchases may be made using credit.
It has been known for retail and other institutions to offer cash-equivalent value in the form of paper gift certificates that an individual may purchase. The purchased value is generally honored at any location of the offering institution. The individual purchasing such cash-equivalent value (the purchaser) may elect to give the value to another person (the recipient) or may keep it for later use. In this way, a recipient of such value may effectively spend a limited amount of the purchaser's money on items of the recipient's choosing.
Commonly, paper gift certificates representing such cash-equivalent value are printed and offered for sale by individual retail institutions or small localized collections of individual retail stores, e.g. the retail stores located in a particular shopping mall. These sponsoring institutions offer one or more locations generally in or around their retail sales areas where paper gift certificates may be purchased. A purchaser goes to one of these locations, and asks to purchase a certain value, for example $100.00. A clerk then prepares, generally by printing or hand-writing, one or more certificates representing the requested value. The customer, in exchange for the cash-equivalent value of the certificates, tenders cash, negotiable instruments, a credit instrument or other method of payment in the amount of the purchased value plus any required service charge.
The purchaser takes the paper certificates and keeps them in his or her possession until such time as he or she may give them to recipient. The paper certificates may or may not be made out specifically in the name of the recipient. The recipient then may, at his or her convenience, go to the sponsoring institution and redeem the certificates in full or partial payment for goods or services, according to the rules for redemption established by the sponsoring institution. The sponsoring institution accepts the certificates, returning any overpayment to the recipient in cash, in the form of another paper gift certificate, or in another form of value. The sponsoring institution keeps the redeemed gift certificates with received cash and negotiable instruments for accounting and security purposes. Redeemed certificates may be kept for relatively long periods by sponsoring institutions, also for accounting and security purposes.
There are, however, numerous disadvantages to purchasable value systems using paper gift certificates. Such programs are quite costly to the sponsoring institution. A paper gift certificate system is paper-intensive, including the associated costs of paper and printing. Paper certificates, frequently in numerous denominations, must be purchased or printed by the sponsoring institution and stored at retail locations or other locations prior to being placed in circulation. They must also be stored at retail or other locations after redemption. Another major cost to the sponsoring institution is accounting. Paper certificates must be tracked prior to use and as they are placed into circulation, frequently by hand-writing the serial numbers of certificates being placed into circulation into a log. After redemption, paper certificates must also be tracked and entered into the sponsoring institution's financial records. Another disadvantage to sponsoring institutions concerns security. Paper certificates can easily be lost, misplaced, or stolen from the sponsoring institution's locations. Further, as with any other paper document, especially those having cash-equivalent value, a risk of counterfeiting exists.
There are also disadvantages from the point of view of the purchaser. Generally, a purchaser may purchase gift certificates only at particular locations of sponsoring institutions. Purchasers must travel to sometimes inconvenient locations in order to purchase paper gift certificates. Additionally, the purchaser must take sufficient cash or other value to purchase the paper gift certificate. A further disadvantage is that the purchaser must choose a sponsoring institution from which to purchase a gift certificate since gift certificates are generally not honored by institutions other than the sponsoring institution. Yet a further disadvantage is that the purchaser must carry one or more paper certificates, frequently in varying denominations, until he or she gives them to the recipient or elects to redeem them. The paper certificates are frequently fully negotiable, and thus the purchaser has the exclusive burden of the risk of loss of paper certificates in his or her possession.
There are also disadvantages from the point of view of the recipient. As with sponsoring institutions and purchasers, the recipient bears the exclusive risk of losing paper certificates in his or her possession, and generally has no recourse for lost or stolen certificates. Paper certificates are frequently of a non-standard size and can therefore be inconvenient to carry in a wallet, handbag or other carrying device. In redeeming paper certificates, the recipient is limited in his or her selection to the goods or services provided by the given sponsoring institution, reducing its value to the recipient. Further, the sponsoring institution may require a certain percentage of the value of the paper certificate to be used at the sponsoring institution, and may not provide the recipient's change from a paper certificate transaction in cash.
There is, therefore, a need for a method and system of providing purchasable value which does not suffer the cost, inconvenience, and security disadvantages of paper certificates. Specifically, there is a need for a method and system of providing purchasable value in the form of a widely-accepted credit card, authorized by a purchaser for a limited amount as a part of his or her credit account, and usable only by a named recipient until the authorized limit is reached or until the expiration of a given time period.